4th Quarter Profit Turns to Loss at Cortland Banks
CORTLAND, Ohio – Cortland Bancorp, holding company of Cortland Banks, reported Friday that it incurred a net loss of $464,000, or 11 cents a share, for the fourth quarter of 2012, not net income of $803,000, or 17 cents a share, as reported Jan. 31.
The holding company said its revised earnings are based on the “result of further information obtained about one of its commercial loan customers” that it did not identify.
“During the first quarter, the company became aware that one of its commercial loan customers had recognized material losses,” Cortland informed the U.S. Securities and Exchange Commission in its Form 8-K, “and that the borrower is insolvent and contemplating a bankruptcy filing. We do not believe we will recover the amount owed from the collateral.”
Cortland has increased its provision for loan losses to $2.12 million from $200,000 for the quarter, an increase of $1.9 million, as a result of what it learned of its customer’s situation.
By recognizing the increased provision, net of its effect on the income taxes owed, Cortland’s report that its 2012 net income of $4.2 million, or 92 cents a share, was revised to $2.9 million, or 64 cents per share.
Regardless, Cortland Banks’ regulatory capital ratios remain well above the minimums required for it to be deemed well-capitalized. Taking into account the reported loss, at Dec. 31, Cortland Banks’ Tier 1 capital to risk-weighted assets stood at 13.15% (6% is minimum for well-capitalized), total risk-based capital to risk-weighted assets, 14.10% (10%) and Tier 1 capital to average assets, 10.24% (5%).
While Cortland thinks it unlikely that the collateral offered will make up for its anticipated losses, it said it will work with the company “in an attempt to recover part of the charge-off. Any amounts recovered in subsequent periods will be reported as recoveries through its allowance for loan losses.”
Shares of Cortland Bancorp closed Friday at $11.00, up 11 cents, on a volume of 5,376. The company released its SEC 8-K after markets closed.
Published by The Business Journal, Youngstown, Ohio.
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